A confidential source says the Philippine National Construction Corporation has explored leaving the Philippine Stock Exchange, but questions remain over whether the company can be fairly valued before minority shareholders are asked to exit.

A forensic review of its audited financial statements reveals a company far more complex than the market has assumed—one sitting on a P51.8-billion Pasay property, continuing to receive tollway-related revenues, and entangled in decades-old legal and accounting disputes that could ultimately determine what the company is truly worth.

Something unusual is unfolding behind closed doors involving the Philippine National Construction Corporation (PNCC), a company many investors have long dismissed as a relic of the country’s toll-road past. 

According to a highly credible source with direct knowledge of the discussions, PNCC has been exploring the possibility of voluntarily delisting from the Philippine Stock Exchange (PSE). Those discussions, however, have yet to gain traction. While no official explanation has been offered publicly, my source suggested that concerns remain over whether the company’s intrinsic value has been adequately established before minority shareholders are asked to exit.

PNCC’s latest audited financial statements reveal why this is so.

PNCC is unlike almost any listed company in the Philippines. What appears to be a dormant government-controlled corporation gradually reveals itself to be a complex combination of prime real estate, continuing tollway-related economic interests, and decades-old legal and accounting disputes. Each materially affects valuation. Together, they explain why arriving at a fair exit price is anything but straightforward.

For years, the market has viewed PNCC through the wrong lens. Most investors still associate it with the North Luzon Expressway and the South Luzon Expressway, concluding that because it no longer operates those toll roads, little value remains.

That perception is not entirely accurate. Although PNCC no longer operates the country’s major expressways, its financial statements show that the company continues to receive revenue shares and dividend income arising from legacy tollway arrangements. 

A forensic reading of the company’s 2024 audited financial statements suggests that the company’s crown jewel is no longer a toll road but a 129,548-square-meter property in the Financial Center Area of Pasay City, one of Metro Manila’s most valuable commercial corridors. (READ: Pasay scam hub’s sublessor is firm of reclamation chair Alex Lopez)

Independent appraisers valued the property at P51.804 billion in 2023. Together with other investment properties, PNCC carried approximately P54.5 billion of investment property at fair value in its 2024 financial statements. Contrary to a common misconception, these assets are not recorded at historical cost. PNCC adopts the fair value model using independent appraisals every two years.

The appreciation has been extraordinary. The same property was valued at roughly P6.6 billion in 2009, P9.7 billion in 2013, P32.4 billion in 2019, P35.7 billion in 2021, and P51.8 billion in 2023. Few real estate assets in the country have experienced such sustained appreciation over the past decade and a half.

Yet the financial statements expose a striking contradiction. A property portfolio appraised at more than P54 billion generated only about P290 million in rental income during 2024. The Commission on Audit (COA) highlighted the same concern, estimating foregone income of more than P714 million because large portions of the Financial Center Area remain underutilized. Only about three hectares are covered by long-term lease arrangements, leaving nearly ten hectares either idle or producing returns far below their apparent potential.

That changes the investment narrative. The issue is no longer whether PNCC owns valuable land. Independent appraisers have already answered that. The real question is why an asset of such magnitude continues to generate such modest economic returns.

Part of the explanation lies in the property’s legal structure. PNCC recognizes rights over the Financial Center Area and records it as investment property, yet title remains registered in the name of the Republic of the Philippines. Government legal opinions cited in the company’s disclosures identify restrictions affecting how portions of the property may be sold, transferred, or developed. Those constraints help explain why a property appraised at more than P50 billion has not been unlocked in the manner a private developer might pursue.

Legacy arrangements, liabilities

The land, however, is only half the story.

Contrary to the widespread belief that PNCC completely exited the tollway business, the financial statements show that the company continues to receive revenue shares and dividends arising from legacy tollway arrangements. Those recurring cash flows are modest compared with the value of the underlying infrastructure, but they demonstrate that PNCC’s economic relationship with the country’s toll-road network did not disappear when operating responsibilities shifted to private concessionaires.

That may explain another intriguing remark from my source, who referred to the situation as PNCC’s “mega franchise.” Having reviewed the filings, I suspect the reference was not to operating toll plazas but to the company’s continuing contractual and economic rights arising from its historical franchise. Those rights, however limited today, remain assets that must be considered in determining any fair exit value.

If the asset side raises questions, the liability side raises even more.

PNCC’s 2024 financial statements received an adverse opinion from the COA. Among the principal issues is the accounting treatment of long-standing obligations involving the Privatization and Management Office. PNCC disputes the government’s position, while COA maintains that liabilities are materially understated because accumulated interests and other charges have not been fully recognized. Depending on how those disputes are ultimately resolved, the amounts involved could reach tens of billions of pesos. The disagreement is not merely an accounting exercise. It goes directly to the question of how much of PNCC’s underlying asset value ultimately belongs to shareholders and how much may be absorbed by government claims.

This is precisely why PNCC has become one of the Philippine market’s most misunderstood companies. Investors who focus only on the legal disputes overlook one of the country’s largest commercial property holdings. Those who focus only on the P51.8-billion appraisal underestimate the legal and accounting uncertainties that continue to cloud realizable value. Neither perspective tells the complete story.

Whether PNCC ultimately remains listed or eventually leaves the PSE is almost secondary. What we have to look into is whether any delisting can fairly compensate minority shareholders, while fundamental questions surrounding the company’s assets and liabilities remain unresolved. 

If the concerns relayed to me accurately reflect the issues being discussed, they are neither trivial nor procedural. They go to the heart of investor protection. Before one of the country’s most unusual listed companies disappears from public view, the market deserves confidence that the price being offered reflects not merely what PNCC earns today, but what it actually owns and what it may ultimately owe.

That, more than the delisting itself, is the real story. – Rappler.com

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